Cordray, watchdogs earn praise, skepticism

Thursday

Jul 18, 2013 at 12:01 AMJul 18, 2013 at 9:56 AM

WASHINGTON - A grinning Richard Cordray took the helm yesterday as the undisputed head of the nation's consumer-watchdog agency. But many agency backers say that even before the Senate finally approved his nomination on Tuesday, Cordray had built a record of accomplishments in the 18 months since President Barack Obama used a controversial recess appointment to install the former Ohio attorney general and treasurer in the job.

Jessica Wehrman, The Columbus Dispatch

WASHINGTON — A grinning Richard Cordray took the helm yesterday as the undisputed head of the nation’s consumer-watchdog agency.

But many agency backers say that even before the Senate finally approved his nomination on Tuesday, Cordray had built a record of accomplishments in the 18 months since President Barack Obama used a controversial recess appointment to install the former Ohio attorney general and treasurer in the job.

“It’s off to a really good start,” said Lisa Donner, executive director of Americans for Financial Reform, a Washington-based coalition of consumer organizations that backed the agency. “ But there’s a whole lot of work left to be done.”

A little more than an hour after Cordray was sworn into office, Obama credited his work as one reason the Grove City resident ultimately won Senate approval, saying 6 million Americans have collected more than $400 million in refunds from companies “engaged in unscrupulous practices.”

“Families, many of them hard-pressed, have money in their pockets, maybe, in some cases, saved a home or sent kids to college, because of the work Rich and his team are doing right now,” Obama said.

In a brief interview last night, Cordray said he was relieved: “It was a longer process than anybody wanted, but, in the end, it was a process that led to a strong result — a great result for the agency, and a great result for the Senate.”

Although the Senate did not confirm him until Tuesday night, Cordray said his agency has worked hard at “delivering a lot of tangible benefits to consumers.” With his appointment secured, “it will be a little easier now to move forward on a smooth path,” he said.

Cordray said he will work to improve relations with Republicans who held up his nomination. “I’v e always made a point to let the Senate and Congress know and see I very much respect their oversight. I think they’ve seen how serious I take their oversight.”

Cordray’s nomination survived intense opposition from conservative organizations and large financial institutions. Diane Katz, a research fellow in regulatory policy at the conservative Heritage Foundation, said that bureau officials “are defining their own powers, which is a dangerous sort of setup.”

“We don’t want regulatory agencies deciding how great their powers are because it’s always going to be as big as they can get away with,” Katz said.

Created by a 2010 congressional overhaul of the nation’s financial regulations, the bureau is designed not only to provide consumers with crucial information about complex financial transactions, but also to force financial institutions to simplify their complex and, at times, incomprehensible offers for new credit cards or mortgages.

Ed Mierzwinski, consumer-program director at the U.S. Public Interest Research Group, said one of the agency’s crowning achievements was to take action against three credit-card companies — Capital One, Discover and American Express — for deceptive marketing practices aimed at enticing customers to sign up for costly and often-useless add-on insurance products.

Mierzwinski said the agency drew the praise of consumer groups by ordering the three credit-card companies to pay back nearly half a billion dollars — and to reimburse customers by having the companies put that money directly into affected customers’ accounts. Previous bank regulators, he said, had set up “very complicated sets of hoops for consumers to jump through” that often deterred customers from claiming money they were owed.

Bureau officials also have worked with about 700 colleges and universities, encouraging them to use an agency-created student-loan form aimed at giving parents and college students better information about college loans.

“They have only one job,” Mierzwinski said of the agency, “protecting consumers.”

But Katz of Heritage said the very structure of the agency is a concern. Under law, she said, the agency is set up to protect consumers against “unfair, abusive and deceptive practices.”

The problem: While unfair and deceptive have been used in regulatory law before, abusive has not — and its definition is unclear, Katz said. “It could be doing something that is treated as legal today, and next week, they could decide that it’s not.”

She said the uncertainty has led banks and other financial institutions to be more cautious about the products they offer consumers, which ultimately has reduced people’s access to financial products.

Donner credited the agency with creating a comprehensive database of consumer complaints, saying such a record puts added pressure on companies to resolve problems. She said the agency also has beefed up research on issues such as payday lending and overdraft fees.

“Some of the markets that the CFPB regulates, nobody has ever regulated at the federal level before,” she said. “There’s never been someone just having the focused mission of consumer protection.”

jwehrman@dispatch.com

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